Municipal housing

Demands to provide a boost to municipal housing in Germany are growing ever louder. This has a lot to do with the shortage of affordable rental apartments in many of the country’s cities, combined with the impact of the current refugee crisis that Europe as a whole is struggling to get to grips with. And yet, simply building more municipal housing is not quite as straightforward as you might think.

How much municipal housing is there in Germany?

How much new municipal housing is being built?

Who qualifies to live in municipal housing?

And who is really living in municipal housing?

How much municipal housing does Germany really need?

How much municipal housing is there in Germany?

Most of Germany’s municipal housing was built in the decades after the Second World War, primarily in the nineteen-fifties and early sixties. A massive rebuilding programme was undertaken in order to undo the damage caused by six years of fierce conflict, and money was tight. Millions of rent-controlled apartments were built as a result of a concerted and broad programme of apartment-building. Rent increases were typically restricted for a period of up to twenty years as a condition of state funding, after which the apartments were absorbed into the regular housing market. According to estimates published by the German Tenants‘ Union (Deutsche Mieterbund), between 70,000 and 80,000 apartments lose their social housing status each year.

How much new municipal housing is being built?

According to the Federal Construction Ministry there were around three million apartments in the municipal housing sector in the mid-1990s. Since then, the figure has more than halved. One reason for this significant reduction is the fact that individual federal states took over sole responsibility for developing municipal housing in 2007. States receive a total of €518 million per year from central government funds for municipal housing, but often use the money for other things, resulting in persistent decline within the sector.

Who qualifies to live in municipal housing?

Municipal housing is intended to help low-income households. The German Economic Institute (IW) in Cologne defines low-income households as those earning less than 60% of median household income, i.e. less than 60% of the household income achieved by 50% of all German households.

And who is really living in municipal housing?

A recent IW study reveals that only 46% of the households living in municipal housing meet the low-income criteria, while 54% have households above the social housing threshold. This is often because individual households improve their incomes over time, without giving up their apartments in social housing.

Why are households allowed to stay in municipal housing even though they no longer qualify?

It boils down to a political decision. After all, no politician wants to be responsible for turfing hundreds of thousands of households out of the apartments where they have been living for years.

Why don’t authorities claw back their subsidies?

Legislation actually exists to allow this, but once again, politicians have refused to take such steps. It is only in very exceptional cases that any additional rental charge is made to households living in municipal housing for which they don’t actually qualify. Hessen is currently attempting to do this more systematically. This would represent a step along the road to more fairness, but wouldn’t really do much to address the fact that there is not sufficient municipal housing for those households truly in need of it.

How much municipal housing does Germany need if it is to really help those on low incomes?

The Pestel-Institut came up with a figure of 4 million municipal apartments, although that was before the current influx of refugees. There are few indications that this is achievable in the foreseeable future. The Federal Ministry of Construction has said that it wants to double its payments to the federal states to €1 billion, also raising the prospect of doubling that again to €2 billion. These are big numbers, but, given the scale of the challenge, are nowhere near enough. Representatives from the housing industry, Haus & Grund, has explored the figures involved using Hamburg as an example. €1 billion would be enough to build around 20,000 units in the municipal housing sector. This means that even if central government raised its funding to €2 billion per year, it would only be enough to build 200,000 units by 2020 – not even close to doing more than putting a dent in the problem.

Does it make any sense to invest more money in municipal housing?

A good question. Frankfurt, for example, spends roughly €45 million per year on its municipal housing. A spokesman from the city’s planning department recently told reporters from the FAZ: “We couldn’t invest more than that, even if we wanted to.” He was referring to the fact that a city such as Frankfurt can only accommodate a limited number of building sites if it is to keep its infrastructure running smoothly, and that there are only so many officials available to process planning and building applications.

Cities including Frankfurt and Hamburg are only approving new housing projects if 30% to 50% of the apartments are classed as affordable. Does this really help?

Land zoned for development in Hamburg is so sought-after that developers really have to fight to get their hands on it. The problem with demanding a high proportion of affordable apartments is that developers then have to increase the prices of the remaining apartments for their projects to remain profitable. This pushes up rents and prices for mid-range apartments, distorting a large section of the existing market.

Are there better approaches to creating more affordable housing?

A majority of experts agree that it makes far more sense to provide low-income households with direct support, rather than subsidising housing. In the case of housing benefits, households‘ incomes are continually reassessed and benefits are withdrawn as soon as incomes exceed a certain threshold. This is certainly a more targeted approach. However, this doesn’t help many of those in need to find an appropriate apartment, let alone convince a landlord to accept them as a tenant.

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